Forums
Financial Management
In December, 2017 AB Co.'s share was sold for Rs. 146 per share. A long term earnings growth rate of 7.5% is anticipated. AB Co. is expected to pay dividend of Rs. 3.36 per share. i) Determine rate of return an investor can expect to earn assuming that dividends are expected to grow along with earnings at 7.5% per year in perpetuity? ii) It is expected that AB Co. will earn about 10% on book Equity and shall retain 60% of earnings. In this case, whether, there would be any change in growth rate and cost of Equity? Analyse.
Answers (1)